The course weblog for PA5113, State and Local Public Finance, at University of Minnesota

Tuesday, April 28, 2009

Think Congestion is Costly?

Minneapolis-St.Paul is now the 10th worst city in the nation when it comes traffic congestion, according to results of a national traffic study by the Washington-based firm Inrix. The Twin Cities ranked 13th on Inrix's 2007 survey, but moved up three spots to No. 10 in 2009. The bumper-to-bumper traffic brought a huge price on valuable time, productivity, energy consumption, air quality, and even safety on the road. Texas Transportation Institute calculated that the nearly 1.4 million Twin Cities rush-hour commuters in 2005 wasted 41.8 million gallons of fuel stuck in traffic. Also lost over the year were an average of 43 hours per driver valued at $14.60 per hour for individuals and $77.10 for businesses. That same year, the American Automobile Association (AAA) study said the Twin Cities area cost per resident of crashes was $757, and more than one study concluded crashes account for up to half the congestion we encountered.

As a market-based solution, congesting pricing became an experimental measure to reduce traffic volume. Some researchers estimated that a 1 percent increase in the time-plus-money cost of automobile travel would lead to roughly a 1 percent reduction in the rate at which those trips are taken. In 2005, Minnesota opened its first priced lane, the I-394 MnPASS HOT Lanes. In September 2009, a similar congestion pricing scheme which called Priced Dynamic Shoulder Lanes (PDSL).

According to the evaluation of I-394 HOT lanes in operation in 2007, it did successful work as a traffic management. Average speeds in the unrestricted/free lanes have gone from 58.9mph to 62.2mph - an increase of 3.3mph or nearly 6%. But the revenue is under half forecast, just a bit over $1m. How to financially self-support challenge this market-based measure. The emergence of Public-Private partnerships (PPPs) offers an innovative method for financing infrastructure in pricing roadways.

For decades, policymakers have largely relied on taxes from gasoline to fund investment in roadways. But the growing scarcity of fossil fuels and the political infeasibility of raising taxes make the revenues from transportation-related taxes are failing to keep apace with the needs of the transportation system, the congestion pricing really provides a trial not only in improving life quality, but also in funding transportation infrastructure.